The pound and the euro jump as Carney and Draghi appear hawkish

President
of the European Central Bank (ECB) Mario Draghi (L) speaks with
Governor of the Bank of England Mark Carney at the start of the
International Monetary and Financial Committee (IMFC) Meeting
during the 2016 World Bank-IMF Spring Meeting in Washington April
16, 2016.Reuters/Joshua
Roberts

LONDON — The pound and the euro are rallying on Thursday morning
after hawkish comments from both Bank of England Governor Mark
Carney and ECB President Mario Draghi in the last couple of days.

Draghi hinted on Tuesday that he may be open to the removal of
some of the bank's unprecedented monetary stimulus, which has
taken the form of negative interest rates and €60 billion of
quantitative easing. That sparked a flurry of buying into the
single currency, which jumped to a near 10-month high after the
comments.

It extended those gains on Wednesday and has continued to do so
on Thursday morning, despite ECB sources telling both Reuters and
Bloomberg that the market has misinterpreted Draghi's comments
and overreacted to them.

Regardless, the euro is up 0.31% as of 10.50 a.m. BST (5.50 a.m.
ET) to trade at €1.1413 against the dollar:

As recently as last week, Carney said that he was not ready to
vote for a rate hike. He is one of the more dovish members of the
bank's Monetary Policy Committee. But on Wednesday he sought to
clarify his position, effectively saying that he would be ready
to vote for a rise in rates if business investment begins to
rise, which should offset weaker consumption in the process.

Those comments pushed sterling more than 1% higher on Wednesday
afternoon, with gains continuing into Thursday morning. The pound
is close to 0.3% higher against the dollar, and a little earlier
climbed above $1.30 for the first time since mid-May. It has
since dropped below that mark.

Here is the chart:

Investing.com

Hussein Sayed, chief market strategist at FXTM, said in an
emailed statement: "Both the ECB’s Mario Draghi and the BoE’s
Mark Carney have now sent a message to investors from Sintra,
Portugal, that the era of cheap money is close to an end. This
time, the reaction was mainly felt in fixed income and currency
markets."